U.S. consumers started December feeling much less upbeat about the economy, according to data released Friday. Expectations plunged.

The Thomson-Reuters/University of Michigan consumer sentiment index’s preliminary reading for December dropped sharply to 74.5 compared with the end-November reading of 82.7 and the early November reading of 84.9, according to an economist who has seen the report.

The sentiment index is at its lowest since August. Economists surveyed by Dow Jones Newswires had expected the early-December index to fall but only to 82.0. Read More »

The Labor Department said the Hurricane Sandy didn’t “substantively impact” the November jobs report, but the details used to calculate the drop in the unemployment rate make it look like the storm was affecting the numbers.

As noted yesterday, there are two separate surveys used in the report and timing issues made the one used for the unemployment rate more vulnerable to Sandy impact than the one used to calculate the number of jobs added to the economy. The Sandy effect is more muted in the establishment survey, conducted a week later, which posted a solid 146,000 increase in jobs last month. The weather likely played a stronger role in the report showing a drop in the unemployment rate to 7.7%. Read More »

The economy added 146,000 jobs in November, and the unemployment rate fell to 7.7%. Economists are still digesting today’s report, but here are four initial takeaways:

So much for that Sandy effect: Superstorm Sandy was widely expected to push up unemployment and, more generally, to wreak havoc on the jobs numbers. Neither appears to have happened. The economy added 146,000 jobs in November, right about its recent average, and the unemployment rate fell to the lowest level since 2008. What’s more, the Labor Department “did not substantively impact the national employment and unemployment estimates for November.” That doesn’t mean Sandy had no effect — it just didn’t show up in the national-level figures. Read More »

There’s often a disparity between the unemployment rate and the number of payroll jobs added because the numbers come from two separate surveys. That disparity could be sizable in November.

The key reason is one of timing. In most months, the survey of households, which is used to calculate the unemployment rate, and the survey of businesses, which determines the number of jobs added or lost for the month, are both based on data from the week of the 12th of the month. But because the survey of households requires phone calls to thousands of homes, the government moved it up a week in November to avoid conflicting with Thanksgiving. The business survey stayed in its usual week. So in tomorrow’s report, the payroll survey will show how many people were working the week of Nov. 12, while the unemployment rate will be based on who was working the week of Nov. 5.

Ordinarily, one week wouldn’t make much difference to the data. But November 2012 wasn’t a typical month. Initial claims for unemployment benefits were all over the map early in the month thanks to Superstorm Sandy, and ADP yesterday estimated the storm would subtract 86,000 jobs from the November total. Sandy struck at the end of October, meaning that when the household survey was conducted in early November, there were still widespread power outages, flooding and mass-transit snarls keeping businesses closed and workers at home. Meanwhile, since it’s earlier in the month, some holiday hiring may not have ramped up yet. Further complicating the picture is the presidential election being held that week and the thousands of poll workers that come with it. Read More »

After she blew in, Sandy took some wind out of consumers’ sails. But the impact should be temporary.

The Commerce Department reported Friday that personal income was flat in October versus the previous month and nominal spending fell 0.2%. The report noted there were effects from Sandy but Commerce could not quantify the total impact. The largest adjustment was an $18 billion drop in wages and salaries because of work interruptions.

After accounting for price changes, real consumer spending began this quarter slightly down from its average in the third quarter, when real spending increased at an annual rate of only 1.4%.

Households aren’t the only sector that looked peaked this quarter. The latest reports on factory activity also were lackluster, even in places not hit by the storm. On Friday, the Chicago chapter of the Institute for Supply Management said area factory activity is barely expanding this month, and new orders are contracting. Read More »

Consumer spending fell in October. The Wall Street Journal Online’s Tom Ortuso and Fact and Opinion Economics Chief Economist Robert Brusca take a look at why and what it means going forward. Read More »

–Fiscal Cliff Effects: Macroeconomic Advisers breaks down how much each part of the fiscal cliff will take away from 2013 growth. “The largest two items are — not surprisingly — the expiration of the Bush tax cuts (-1.15 percentage points of GDP growth over the year) and the spending sequester (-0.76 percentage point of GDP growth). At the bottom of the list, the new taxes enacted as part of the Affordable Care Act will subtract less than one-tenth of a percentage point from growth over 2013. In total, the maximum potential hit to growth from the fiscal contraction is 3.4 percentage points over the entire year, but more than 5 percentage points in the first half of the year. Our baseline forecast includes roughly 11/4 percentage points of the total possible hit to growth.”

–Sandy Aftermath:Jaison R. Abel and Jason Bram look at the effects of Hurricane Sandy on the New York Fed’s region. “In the newest report—based on information collected through November 15—many businesses across the New York City metropolitan region reported losses in activity due to widespread disruptions from Sandy. Prior to the storm, however, the general consensus was that business conditions were holding steady. In upstate New York, which wasn’t affected directly by the storm, most contacts reported business as usual, though there were scattered signs of softening in housing, manufacturing, and vehicle sales. Some contacts upstate did note some indirect effects from the storm’s disruptions—largely to supply chains.”

–Potential GDP: Brad DeLong posts some interesting charts on CBO’s estimates of potential GDP. “CBO estimates of potential GDP closely track private-sector estimates of potential GDP. The gap between actual and potential GDP right now is still 6.6%. There is still lots of space for the CBO to mark down potential GDP: with no gap-closing 2017:IV potential GDP would be $15.2 trillion—8.6% below its 2007-vintage forecast. The CBO is currently forecasting a 3.5%/year real GDP growth rate over the next five years. To return us to the 2007-vintage potential GDP path would require a growth rate averaging 5.3%/year over the next five years.” Read More »

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